In a split decision, two of the three members of the panel overseeing the lawsuit sided with the federal government in what is a victory for the Obama administration.

The US Justice Department had appealed the decision from the lower court, which ruled that the research was likely illegal. US District Court Judge Royce Lamberth had declared that federal law prohibits taxpayer money from being spent on work that destroys embryos.

Lamberth held that government funding for embryonic stem-cell research was barred by a law passed by Congress in 1996, in a provision called the Dickey-Wicker Amendment. The amendment prohibited the use of federal money for research in which an embryo is destroyed. “Congress has mandated that the public interest is served by preventing taxpayer funding of research that entails the destruction of human embryos,” Lamberth said.

The lawsuit was filed against the federal government by several groups after the Obama administration asked the National Institutes of Health to rewrite guidelines on stem cell research, that would have allowed broader funding for research on embryonic stem cells.

Federal funds had been limited by former President George W. Bush to cells that were derived from embryos prior to August 2001. Obama told the NIH to draft new rules that would allow for more research to be conducted on cells from human embryos created by in vitro fertilization for reproductive purposes but were no longer needed.

The plaintiffs said in court documents, and Lamberth agreed, that the language used by Congress was “unambiguous” in barring federal funding on research involved embryonic stem cells. The appeals court’s interpretation, however, was that it was not as clear-cut as the plaintiffs believed.

“It is entirely reasonable for the NIH to understand Dickey-Wicker as permitting funding for researching using cell lines derived without federal funding even as it bars funding for the derivation of additional lines,” they wrote.

Sam Casey, attorney for the Law of Life project, said the ruling was a disappointment, but not surprising. He added that the plaintiffs were heartened by the fact that at least one of the appeals court judges dissented and wrote a strong opinion supporting their case.

Casey said the plaintiffs were not going to give up the fight. He said they will ask the entire appeals court to review the decision by the panel and make a ruling. If necessary, he added, they planned to take their case all the way to the US Supreme Court.